castello branco

7/29/2019 Castello Branco

1/30

Renewable EnergyBrazil

April 2013

www.pwc.com


2/30

PwC

Summary

1. Brazilian Renewable Energy Overview

2. Wind energy

3. Biomass

4. Small Hydro

5. The organized contract auctions for renewable energy

6. Why to Invest on Renewable Energy in Brazil

2

April 2013Renewable Energy Brazil


3/30

PwC

Brazilian Renewable Energy Overview

Brazil has one of the cleanest energymatrices in the world, 47% of theoverall energy production

comes from renewable sources The worldwide average is about

19%

3


Over 80% of the electricity generation installed capacityin the

country (121,823 MW) comes from renewable sources

52.70%

81.40%92.80%

47.30%

18.60%7.20%

Brazil (2009) World (2007) OECD (2008)

Energy Supply Structure

Non-renewable Renewable

Source: BEN 2010


4/30

PwC


85% of the renewable electricity generation capacity comes from hydrosources:

Large plants in cascade over different basins

Large reservoirs

During the last five years three other renewable resources havebecome competitive for large-scale generation expansion:

Wind power

Small hydro

Biomass

In 2011 the other renewable sources installed capacity totalizes 13,700MWand by the end of 2013 is estimated an increasing of5,900 MW,currentlyunder construction

4



5/30

PwC

Brazils hydro reservoirs and the countrywide transmission gridprovides flexibility to modulate seasonal and intermittent generation

Complementarity generation with hydro:

Hydro and wind (in the Northeast region of the country)

Hydro and bioelectricity (in the Southeast region of the country)

5




6/30

PwC 6




7/30

PwC


7


2002 .... 2011 CAGR

Oil 74,927 108,976 4.3%

Natural Gas 15,416 23,888 5.0%

Hydro 24,604 36,837 4.6%

Firewood 23,645 26,322 1.2%

Sugar Cane 25,279 43,270 6.2%

Others 5,055 11,200 9.2%

Tota l (thousa nds T OE) 168,926 250,492 4.5%

Source: BEN 2011, Chapter 1 Energy Analysis and Aggregated data


8/30

PwC


8


2002 .... 2011 CAGR

Hydro 64,473 82,459 2.8%

Thermal 13,813 31,243 9.5%

Nuclear 2,007 2,007 0.0%

Wind power 22 1,426 59.0%

Total (MW) 80,315 117,135 4.3%

Source: BEN 2011, Chapter 2 - Energy Supply and Consumption by Source


9/30

PwC


9


In 2012 In 2021

Renewable Energy on the Brazilian Energetic Matrix

Hydro andElectricity

33,01%

Firewoodand

Charcoal19,09%

Sugarcaneand

derivatives38,00%

Otherrenewables

9,90%

Energetic Matrix 2012Renewable Energy by type of source

Source: PDE 2012 - Results

Hydro andElectricity27,94%

Firewoodand

Charcoal13,43%

Sugarcaneand

derivatives47,18%

Otherrenewables

11,45%

Energetic Matrix 2021Renewable Energy by type of source

Source: PDE 2012 - Results


10/30

PwC


10


This ten years plan (2012-2021) requires an investment of

approximately US$ 118.1 billions, of which US$ 58.7 billions havealready been assigned through energy auctions.

Within this plan, the remaining US$ 59.4 billion are to be investedthroughout the next ten years on Hydro, Small Hydro, Biomass andWind energy plants.

Source

Billion

US$ %

Billion

US$ %

Billion

US$ %

Hydro 20.5 34.8% 33.7 56.7% 54.1 45.8%

Small Hydro-Biomass-Wind 16.7 28.4% 24.4 41.1% 41.1 34.8%

Thermal 10.8 18.4% 0.7 1.1% 11.5 9.7%

Nuclear 3.1 5.3% - 0.0% 3.1 2.6%

Natural Gas 1.5 2.6% 0.7 1.1% 2.2 1.8%Coal 1.2 2.0% - 0.0% 1.2 1.0%

Oil/diesel 5.0 8.5% - 0.0% 5.0 4.2%

Total 58.7 100.0% 59.4 100.0% 118.1 100.0%

Source: PDE 2011

Authorized and

Contracted Plants Planned plants Total


11/30

PwC


11


Operation Construction Total

Hydro 77,742 8,053 85,795

Thermal 30,581 4,892 35,473

Small Hydro 3,857 729 4,586

Nuclear 2,007 1,350 3,357

Wind power 1,114 813 1,927

Total (MWh) 115,301 15,837 131,138

Source: ANEEL

Hydro67%

Thermal27%

SmallHydro

3%

Nuclear2% Wind power

1%

Power Plants in Operation in 2011(%)

Source: ANEEL

Hydro51%

Thermal31%

SmallHydro

3%

Nuclear8%

Wind power5%

Power Plants under Construction in 2011(%)

Source: ANEEL


12/30

PwC

Wind Energy

Currently 59 wind farms are in operation, mostly concentrated in theNortheast and South regions;

The milestone of 1,000 MW was achieved in June 2011;

In 2021 the installed wind capacity in Brazil should be on order of15,500 MW (8.5% of the total energy, compared to 1.2% current).

Other countries in Europe uses around 10%;

12April 2013Renewable Energy Brazil

Source: Moodys, National Agency of Electricity (ANEEL), Globo Natureza, GWEC.


13/30

PwC

Wind Energy


BNDES (National Development Bank of Brazil), has signed or is in theprocess of signing around 51 contracts of direct and indirect funding,totaling US$ 2 billion for the deployment of 1,369 MW. Another 44operations are in analysis, with applications for funding of around US$1.7 billion

Source: PNE 2011, Chapter III Electricity generation

1,403 1,981

5,208

7,151 8,1009,383

9,88311,033

12,68314,113

15,563

1.2%

1.6%

4.0%

5.2%

5.6% 6.2%6.3% 6.8%

7.6%8.1%

8.5%

00%

01%

02%

03%

04%

05%

06%

07%

08%

09%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Participation of wind energy installed capacity ofpower generation in Brazil

Wind Total MW Part. %


14/30

PwC

Wind Energy


Source: BEN 2011 - Energy Supply and Consumption by Source

U.S. Energy Information Administration (EIA), International Energy Statistics database

(*) PDE 2011

Country (MW) 2008 2020 2008 2020

Brazil* 102,949 173,645 85% hydro 398 14,113 34.6%

Russia 224,240 235,000 68% thermal 17 7,000 65.2%

India 177,376 290,000 80% thermal 10,243 16,000 3.8%

China 797,078 1,313,000 77% thermal 12,170 99,000 19.1%

World 4,624,767 5,796,000 82% hydro 121,000 398,000 10.4%

Main generating

source in 2008 CAGR

Electricity generation

Installed Capacity

Wind generating

Installed Capacity


15/30

PwC

Wind Energy


Growth of World wind energy generating capacity(GW)

Source: World Energy Council


16/30

PwC

Wind Energy


Onshore wind energy generation cost

(US$/MWh) by Wind speed (m/s)

Source: World Energy Council


17/30

PwC

Wind Energy


Wobben Enercon (Germany) -> So Paulo

Alstom (France) -> Bahia

Gamesa (Spain) -> Bahia

GE (USA) -> So Paulo e Bahia

Impsa (Argentina) -> Pernambuco e Bahia

Vestas (DM) -> Cear

MTOI -> Santa Catarina

3 coming from ChinaSinovelGouldian

Goldwin


18/30

PwC

Biomass

18

Source: Unio da Indstria de Cana de aucar (UNICA)

Renewable Energy Brazil


19/30

PwC

Biomass

19

Sugarcane production is concentrated on Center-South andNortheast regions of Brazil.

U.S. Environmental Protection Agency (EPA) classified Braziliansugarcane ethanol as capable of reducing greenhouse gas (GHG)

emissions by at least 50% compared to gasoline;

Processed Residues from sugarcane (bagasse and straw) arealternatives for generating electricity.

Bioelectricitysupplied to the national grid could increases from 5% in2012 to up of 18% of the Brazilian energy grid by 2021,



20/30

PwC

Biomass

20

Increasing the annual reduction in emissions generated by the useof ethanol and bioelectricity in Brazil from 46 million tons of CO2equivalent reached in 2011, up to 112 million tons by 2020.

Biomass is an strong option to deal with the unpredictable

behavior of rainy periods along the year:

In March 2013, at the end of the rainy period the hydro power plantslocated on Southeast and Middle West reservoirs (70% ofBrazilian water reservoirs) were operating at 49.9% of itscapacity.

In comparison to the previous three years, when the reservoirsoperated at 82.9% (2010), 83% (2011) and 78.5% (2012).

In March 2013 the Northeast region the reservoirs were operatingwith 42% of its capacity. In March 2012 was 82%;



21/30

PwC

Biomass

21

586672

745 808 865

910 9551.018

1.0891.155

299 375439 492

540 576 611665 726

781287

297 306

316325

334 344353

363374

0

200

400

600

800

1.000

1.200

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Sugar cane total demand projection(Million of Ton)

Total Sugar cane Sugar cane for sugar Sugar cane for etanol

Source: BEN 2012 - Energy Supply and Consumption by Source

2012 .... 2021 CAGR

Sugar cane for etanol 299 781 11.3%

Sugar cane for sugar 287 374 3.0%

Tota l Suga r ca ne (Million of ton) 586 1,155 7.8%



22/30

PwC

Small Hydro

22

The Small Hydro classification is related with the followingcharacteristics:

Location: Installed on reservoirs that does not permit the water flowregularization,

Generation installed capacity

Beyond 1 MW

1.1 MW to 30 MW,

Above 30 MW



23/30

PwC

Small Hydro

23

Hydro Resource generation Potential (MW)

River Basin Amazon

Tocantins/

Araguaia Others Total

Exploited potential 2011 835 12,198 64,744 77,777

Potential expansion until 2015 12,153 2,428 5,563 20,144

Potential expansion 2015-2020 16,943 1,600 5,000 23,543

Potential expansion 2020-2030 44,200 3,200 5,000 52,400

Total (MW) 74,131 19,426 80,307 173,864

Source: PNE 2030 - Hydro generation

Note:

1. Exploited potential includes plants in operation, under construction and commi ss ioned

2. Excludes Itaipus exceed production im ported by the Brazil

3. Figures indicate only 50% of binational power plants

4. The generating potential of sm all hydro plants is not taken into account.


Small Hydro Plants generation Potential (MW)

Plant potential North North-east Central-west South-east South Brazil

Known potential1 773 706 2,808 3,275 2,899 10,461

Theorical potential 4,763 155 3,911 3,625 3,000 15,454

Total (MW) 5,536 861 6,719 6,900 5,899 25,915

Source: CERPCH

(1) does not includes plants in operation


24/30

PwC

The organized contract auctions for renewable

energy Contract auctions are integrated into the regulatory framework since

2004

Regular auctions offer mid- and long-term contracts ahead of delivery,in an exclusive investment market for new capacity

Original motivation was price disclosure and efficiency in theprocurement process (reduction of asymmetric information)



25/30

PwC


energy 62,000 MW of new capacity contracted since 2005 for future delivery

25 auctions for new capacity, including 8 renewable energy auctions

443 new generation projects from all types of technologies

o Gas, renewable, conventional & large hydros, etc

60% renewable in total (40% is conventional hydro & 20% other renewable)

Average price: ~70 US$/MW

US$ 300 billion in contracts



26/30

PwC


energy Regular (yearly) auctions exclusive for new energy

Volumes to contract (regulated consumers pay) and centralized procurement(economies of scale) is organized by the government

Standardized long-term energy contracts offered, backed by firm energy

Technology-neutral but the government can interfere in the candidateprojects with policy decisions:

has been used to organize project-specific auctions (e.g. large hydros), toavoid oil- and coal-fired generation as candidate supply and to contractrenewable



27/30

PwC


energy


2008 - 2011 2014 2015 2016 2017-20212013

All the closed auctions during the period 2008-2011, listed below, are planned to be concludedand delivered by 2015:

In 2012: A-5/2007, S. Antonio, A-3/2009

In 2013: Jirau 2008, A-5/2008, 2nd LFA 2010

In 2014: A-3/2011

In 2015: 10 A-5/2010, 11 A-5/2010, B.Monte,

A-3/2012.

2012

By now it just was programmed toclose one Auction in 2013

(A-3/2013) which should beconcluded and delivered in 2016.

Source: EPE

Auctions schedule


28/30

PwC

The organized contract auctions for renewableenergy


1,299

3,105

5,153

8,029150.0

84.0

72.0

53.0

-

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

-

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

8000.0

9000.0

Proinfa * Auctions 2009 Auctions 2010 Auctions 2011

Historical Contracted wind capacity and Sale price

Cumulated wind capacity contracted (MW) Wind energy price (US$/MWh)

Source: CCEE(*)Proinfa was the first RES support mechanism in the country, based on feed-in rate (administrativily set)


29/30

PwC

Why to Invest on Renewable Energy in Brazil


Vast energy potential

Renewables sharing 45% of energy matrix

Consumption average annual growth of 5,3%

6,000 MW of new generating capacity per year until 2020

Large experience in engineering, construction and operation of powersystems

Major producer of sugar cane, alongside with India

Major biofuels producer

Largest exporter and second largest producer of ethanol

Large areas available for agricultural expansion


30/30

PwC

Thank you

Andr Castello Branco

Partner Rio de JaneiroCorporate Finance & Recovery - M&A and Valuation(55) 21 3232 6261(office)[email protected]

castello branco

Documents